Maruti Suzuki raised the prices of all its models this week, immediately sparking a share increase, up as much as 11%, as investors rallied behind the company after months of falling sales levelled out in December.
India’s number one car company lost around US$500m in production due to labour strikes that shut its factories for weeks last summer. It was also hit by a sales slowdown caused by high interest rates and rising fuel costs.
Sales of small cars, Maruti's key product, have stalled as the increased cost of credit and ownership deter potential buyers. Maruti's sales fell 53% in October but were down only 7% last month.
The carmaker, 54.2% owned by Suzuki Motor, raised prices of all its vehicles by between 0.3% and 3.4% because of what it described as adverse foreign exchange movements and a rise in commodity prices.
Domestic rivals Mahindra & Mahindra and Hyundai have already raised their prices and Indian carmakers expect only marginal sales growth at best in the fiscal year that ends in March.